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Pharmaceutical industry

Pharmaceutical Companies Face Backlash Over Rising Drug Prices

Strategic Insights

— 1 min read

Pharmaceutical companies are facing increased scrutiny and criticism from politicians, regulators, and patients over rapidly rising drug prices. This week, a bipartisan Senate investigation was announced to explore the issue, and a trade group representing dozens of drug companies, the Pharmaceutical Research and Manufacturers of America (PhRMA), is pushing back, arguing that insurers and regulators are to blame for the high costs. Meanwhile, analysts are warning that the sector may be under threat, with some recommending that investors use selloffs to buy select companies.

Key Takeaways:

  • A bipartisan Senate investigation has been launched to explore the issue of rapidly rising drug prices, with the Senate Special Committee on Aging seeking documents and information from four pharmaceutical companies: Valeant Pharmaceuticals, Turing Pharmaceuticals, Retrophin, and Rodelis Therapeutics.
  • The investigation will hold an initial hearing on December 9, with subsequent hearings to be held in the following months as needed.
  • PhRMA, a trade group representing dozens of drug companies, is arguing that insurers and regulators are to blame for rapidly rising drug costs, rather than pharmaceutical companies.
  • Analysts are warning that the sector may be under threat due to increasing scrutiny and criticism, with some recommending that investors use selloffs to buy select companies.
  • Companies such as Gilead, Celgene, Biogen, Amgen, BioMarin, and Alexion have high-priced therapies and may be impacted by the emerging debate over drug pricing.
  • Large cap drugmakers such as Pfizer, Allergan, AstraZeneca, Bristol-Myers, Eli Lilly, GlaxoSmithKline, Johnson & Johnson, Merck, Novartis, Roche, and Sanofi are also under scrutiny.

Statistics:

  • The Senate investigation will hold an initial hearing on December 9.
  • Four pharmaceutical companies have been requested to provide documents and information: Valeant Pharmaceuticals, Turing Pharmaceuticals, Retrophin, and Rodelis Therapeutics.
  • PhRMA represents dozens of drug companies.
  • Analysts are warning that the sector may be under threat due to increasing scrutiny and criticism.
  • 18 Democratic congressional representatives have requested that Valeant Pharmaceuticals be subpoenaed over alleged "massive" price increases for certain of its drugs.
  • The pre-market trading on November 4 saw Retrophin slide over 10% to $19.50 per share, while Valeant rose about 1% to $98.75.

Sources:

  • TheFlyOnTheWall.com (November 4, 2015)
  • COMTEX (November 4, 2015)
  • The Hill ( November 4, 2015)
  • Piper Jaffray (analyst report)
  • Jefferies (analyst report)

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